Corporate Practice of Medicine & MSO Structures
Laying the Foundation for Your Success
LumaLex Law: Navigating CPOM Laws for Medical & Telehealth Businesses
The Corporate Practice of Medicine (CPOM) doctrine encompasses state laws designed to ensure that only licensed medical professionals can own, control, or make decisions within medical practices. These laws aim to keep clinical decisions focused on patients’ best interests, free from non-clinical business influences. However, CPOM laws can complicate how entrepreneurs, investors, and healthcare businesses structure their operations.
For non-physicians or organizations interested in participating in the healthcare industry, navigating CPOM regulations is vital to avoid noncompliance that could lead to penalties, operational disruptions, or legal disputes. At LumaLex Law, we specialize in helping clients find solutions to these challenges by developing legally compliant business frameworks, such as Management Service Organizations (MSOs), to keep clinical and business operations clearly delineated.
What Are CPOM Laws?
CPOM laws vary greatly from one state to another. Some states enforce strict CPOM prohibitions, restricting non-physicians from owning or managing medical practices. This means that even indirect control over clinical operations is prohibited. Other states interpret CPOM regulations more leniently, allowing non-physician participation under specific conditions.
CPOM laws serve to uphold the ethical principles of medicine by maintaining separation between clinical judgment and financial interests. For healthcare entrepreneurs, this means that attention must be paid to where and how they establish their business to pave the way for compliant, sustainable operations.
CPOM Laws by State
The application of CPOM laws differs significantly across “CPOM states.” Below, we highlight examples of how these laws vary depending on the jurisdiction.
California
California has some of the nation’s strictest CPOM laws, strictly prohibiting non-physicians from owning, controlling, or operating medical practices. Physicians must own and manage any medical corporation, requiring compliance with extensive state regulations. At LumaLex Law, we frequently develop MSO structures, enabling entrepreneurs to legally participate through non-clinical administrative, operational, and financial support without violating the CPOM doctrine.
New York
Similar to California, New York enforces stringent CPOM restrictions, requiring medical practices to be owned and operated solely by licensed physicians. Professional corporations (PCs) governed by licensed physicians are the foundation of compliant medical businesses in this state, with business management and other non-clinical responsibilities handled through MSOs.
Texas
Texas also upholds strict interpretations of the CPOM doctrine, creating significant legal constraints for entrepreneurs and investors seeking to open clinics. However, a tailored MSO agreement overseen by experienced legal counsel allows businesses to manage operations while leaving clinical decisions entirely in the hands of licensed practitioners.
Florida
Florida provides more flexibility, as it does not explicitly prohibit the corporate practice of medicine. Non-physicians can own and manage medical businesses more freely as long as they comply with other general healthcare regulations.
Delaware
Similar to Florida, Delaware imposes relatively lenient CPOM restrictions, giving healthcare businesses greater freedom to operate under various models. Despite this flexibility, setting up an MSO structure remains a strategic step to ensure clarity between clinical and non-clinical responsibilities while complying with overarching federal and corporate laws.
What Is an MSO, and Why Is It Essential?
An MSO, or Management Service Organization, is a separate entity that handles the non-clinical facets of a medical practice. This structure enables non-physicians to contribute to the business’s growth and management while keeping medical decision-making strictly in the hands of licensed professionals.
Functions of an MSO:
Administrative and Human Resources (HR): Manages staffing, payroll, and employee training to ensure seamless operations.
Billing and Financial Management: Ensures compliance with healthcare billing laws and manages revenue cycles effectively.
Real Estate and Equipment Leasing: Handles facility management and medical equipment procurement to support clinical operations.
Marketing and Patient Acquisition: Builds a strong patient base while adhering to healthcare advertising rules.
Technology and IT Services: Implements secure telehealth platforms and ensures compliance with electronic health record requirements.
An MSO-supported clinic operates efficiently and maintains legal compliance with CPOM laws, providing a sustainable pathway for entrepreneurs and non-physician investors to participate in healthcare.
MSO Structures for Telehealth Businesses
CPOM challenges increase exponentially for telehealth businesses operating across multiple states, due to varying CPOM laws in different jurisdictions. MSOs serve as a critical framework in scaling telehealth operations while mitigating regulatory risks.
Benefits of an MSO in Telehealth:
Scalability: Enables telehealth businesses to expand across state lines without violating CPOM laws.
Legal Clarity: Clearly separates clinical and non-clinical operations, reducing legal ambiguity.
Operational Efficiency: Centralizes and streamlines back-end operations, such as IT, marketing, and billing.
For multi-state healthcare providers, LumaLex Law ensures full compliance by structuring tailored MSO agreements and navigating the intricate landscape of state-specific CPOM laws.
Why Hire LumaLex Law?
Developing legally compliant MSO structures requires careful attention to detail. CPOM laws and healthcare regulations are nuanced and vary widely depending on the state where your business operates.
At LumaLex Law, we offer the following services to help healthcare entrepreneurs succeed in CPOM-compliant operations:
Regulatory Knowledge: With extensive experience in CPOM states, we understand the complexities and restrictions that businesses face.
Contract Drafting: We develop agreements between PCs and MSOs to define roles, responsibilities, and revenue-sharing terms clearly.
Tax Strategies: We help optimize the financial aspects of your business while staying compliant.
Risk Management: We design frameworks to minimize liability and keep your operations within legal boundaries.
Multi-State Licensure: For telehealth providers, we streamline the licensing process to avoid delays and interruptions to your business.
Build a Compliant Healthcare Business Today
Understanding and adhering to CPOM laws is non-negotiable for healthcare entrepreneurs. Whether you’re launching a clinic, starting a telehealth practice, or expanding your operations, LumaLex Law offers the expertise needed to ensure compliance and growth.
Contact LumaLex Law today to learn how we can help you successfully navigate CPOM laws and structure an MSO designed for long-term success in the healthcare industry.
FAQ
CPOM laws prevent non-physicians from owning or directly controlling medical practices in certain states. These regulations ensure that medical decisions are made solely by licensed professionals.
No, in states with CPOM laws, non-physicians cannot own or control medical clinics. However, they can participate in the business by owning an MSO (Management Service Organization) that handles the clinic’s non-clinical operations.
An MSO is a separate entity that manages the non-clinical operations of a medical practice, such as billing, HR, marketing, and administrative support. This allows non-physicians to invest in the business while staying compliant with CPOM laws.
LumaLex is headquartered in Miami, FL and has additional offices in New York, New Jersey, and California. During your initial consultation, we'll connect you with the right attorney on our team with the most up-to-date expertise in your field—a must for any growth-stage company.
- Ensures compliance with CPOM laws
- Allows non-physicians to invest in healthcare businesses
- Improves operational efficiency and business scalability
- Reduces regulatory risks and legal complications
Setting up an MSO requires careful legal structuring to ensure compliance with state regulations, draft clear contracts, and mitigate risks. Our law firm specializes in structuring MSOs to meet regulatory requirements.
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